Membership of sustainability index in an emerging market: Implications for sustainability

This research investigates the linkage between corporate sustainability performance and corporate financial performance in an emerging market. Moreover, this study examines whether the firm size and profitability affect this relationship. The level of corporate sustainability performance is proxied by listing in Borsa Istanbul Sustainability Index, and corporate financial performance is proxied by share prices. Empirical analyses of the data belonging to the listed firms in Borsa Istanbul for the period of Q1 2014 - Q3 2018 indicate a negative relationship between low level of corporate sustainability performance and corporate financial performance. Additionally, results suggest that this relationship does not change based on the company size and profitability. This paper sheds light on investors' commitment to companies listed in a sustainability index which are expected to have high level of sustainability performance. The findings of this study provide evidence that membership in a sustainability index is significant for investors in an emerging market. Policymakers may use this finding as a supporting argument for their efforts to increase the awareness of both companies and investors on sustainability issues via sustainability indices. (C) 2019 Elsevier Ltd. All rights reserved.